Global jewelry demand, which represents more than half of total global demand, was unsurprisingly down 30 percent year-on-year to 510 tons.

In comparison, Q2 2014 was 11 percent higher than Q2 2012, extending the broad upward trend evident since 2009. India and China remain significant drivers of the global jewelry market, purchasing 154t and 143t respectively. In what is traditionally a quieter quarter for jewelry, consumers continued to digest opportunistic purchases made in 2013 and adopted a more “needs” based approach to their jewelry buying. Indian jewelry buying was also affected by high value purchases being restricted in the run up to the election and the continued impact of import restrictions on gold.

Meanwhile, there were continued signs of recovery in some Western markets as jewelry demand in the US rose by 15 percent to 26t and the UK rose 21 percent to 4t as consumer confidence continued to grow in line with the economy and yellow gold came back into fashion.

Central banks bought 118t of gold in Q2 2014, a rise of 28 percent versus the same period last year. It was the 14th consecutive quarter in which central banks were net purchasers of gold driven by a number of factors, including a continued diversification away from the US dollar1 and the backdrop of ongoing geopolitical tensions in Iraq and Ukraine.

Total investment demand (investment in bars and coins combined with exchange-traded funds (ETF) investment) was up 4 percent to 235t. Investment in bars and coins stood at 275t for Q2 2014, a fall of 56 percent, following unprecedented levels of buying during the same period last year. In Q2 2014, many investors were uncertain about the direction and momentum of the gold price, while traders in price sensitive markets were far less active due to low volatility. The quarter did see an improvement in investor sentiment towards ETFs compared to last year. Outflows stood at 40t for the quarter, a tenth of the redemptions seen in the same quarter a year ago. The bulk of these outflows occurred at the beginning of the quarter, turning to marginal inflows by the end.

Marcus Grubb, Managing Director of Investment Strategy at the World Gold Council, said: “In the context of an exceptional year last year where we saw record consumer buying and investor sell-offs, this quarter’s demand continues to demonstrate a return to long-term trends, illustrating the uniquely balanced nature of the gold market. Jewelry consumers continued to digest the exceptional purchases of 2013 and investors also rebalanced, pulling back from the extremes we saw last year. Overall the gold market is stabilizing following the extraordinary conditions we saw in 2013.”

In value terms, gold demand in Q2 2014 was $40 billion, down 24 percent compared to Q2 2013. The average gold price of $1,288/oz was down 9 percent on the average Q2 2013 price.

The key findings:

Jewelry remains the biggest component of gold demand, representing more than half of all demand at 510 tons. Although it is down 30 percent year on year, jewelry has been extending the broad upward trend from the base established in early 2009.

Central banks increased purchasing by 28 percent to 118t compared with the same period last year, as they continued to use gold as a hedge against risk and diversify away from the US dollar.

Total investment demand (combined investment in bars and coins and ETFs) was up 4 percent to 235t. However, there was a 56 percent decrease in bar and coin demand from 628 tons in Q2 2013 to 275 tons in Q2 2014 following unprecedented levels of demand last year. ETF outflows were 40 tons, a tenth of the outflows seen in the same period last year

Taken together, these factors show that gold demand is reverting to long-term trends after an extraordinary 2013.

Total supply for the quarter was up 10 percent year on year solely due to the growth in mine supply.

H1 recycling is the lowest since 2007 although the figures for Q2 2014 are up 1 percent to 263 tons compared to last year - a relatively low figure compared to the historical average.